The Irish stock market slumped today as the effects of losses in Asia and the US impacted on world markets.
The Iseq index fell almost 200 points this morning, a fall of 2.75 per cent, before recovering close to 15 points. The Nasdaq slipped just over 1 per cent earlier, while the FTSEurofirst 300 index fell 1.6 per cent, tracking lower Asia, which fell even deeper by 3.6 per cent. MSCI main world equity index was down 1.2 per cent, dipping below 400 for the first time in three weeks.
On the Irish market, the biggest loser was Kingspan, which lost close to 7 per cent by late afternoon. However, the major stocks were also hit, with Bank of Ireland, AIB and Anglo Irish Bank all losing more than 3 per cent. Irish Life & Permanent lost more than 1.9 per cent by late afternoon.
It wasn't all bad news for Irish stocks, with Independent News rising 3.66 per cent and Glanbia up by 1.5 per cent, but the gains weren't enough to outstrip the losses.
Meanwhile, the dollar hit two-month peaks as last week's strong US inflation data reduced expectations the Federal Reserve would deliver further interest rate cuts soon. The dollar rose against a basket of six major currencies while it rose to a 1-1/2 month high of $1.4365 per euro.
In a sign that rising food and agricultural prices may push up inflation globally, US wheat futures surged more than 3 per cent and surpassed $10 a bushel for the first time.
Markets are now pricing in around a 78 per cent chance of a January Fed cut in benchmark interest rates to 4 per cent, which would follow three easing moves since the credit crisis broke in August. Earlier this month, markets fully priced in a cut.
"Market are on tenterhooks to see if the global central banks can start to alleviate at least part of the pain (in money markets)," said Jeremy Stretch, strategist at Rabobank.
"It's the unwillingness to lend that's the real stickiness here. So it's all very well injecting the money into the system, but if it just gets stuffed under the mattress in the banks, that's not necessarily going to alleviate the problem."
